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INSIDE OUT

INSIDE OUT - Blairite ministers tell me that we (the British) are winning the arguments in the European Union for freer markets - and against further stultifying centralization on Brussels. Douglas Hurd and other pro-EU Tory grandees told me the same during the Major years of the early '90s, though victory proved elusive as continental Europe continued to stride off in a leftist, social democratic direction.

by Andrew Neil, publisher of The Business and Scotsman newspapers

Published: 01 Jul 2003

Last Updated: 31 Aug 2010

Blairite ministers tell me that we (the British) are winning the arguments in the European Union for freer markets - and against further stultifying centralization on Brussels. Douglas Hurd and other pro-EU Tory grandees told me the same during the Major years of the early '90s, though victory proved elusive as continental Europe continued to stride off in a leftist, social democratic direction.

Today's British government ministers claim new allies in the imminent arrival of the 10 nations scheduled to join the EU in May 2004, when the union will expand from 15 to 25 member states. Mostly newly liberated from the yoke of Soviet Marxism, the Ten (the Baltic states, Hungary, Slovenia, Czech Republic, Slovakia and Poland, plus Malta and Cyprus) are billed as supporting Britain in reforming the sclerotic eurozone. And they share Britain's pro-American stance on foreign policy - look at the support they gave Washington and London in the run-up to the Iraq war.

The argument has a superficial attraction. But London Europhiles who see the Ten as a decisive Praetorian guard in the struggle against Franco-German statism and anti-Americanism will be sorely disappointed. They will give the EU a much needed economic pep - but it will be modest. Productivity in the Ten is 50% of the EU average but wage levels are only 25% -which explains why Western business has pumped about Eu100 billion in foreign direct investment into them in recent years and why per capita income in the Ten has increased three times faster since the mid1990s than the EU as a whole.

So the Ten are catching up with the rest of the EU and their achievements have been recognised in the 30%-40% rise in Central European currencies in real terms since the mid1990s. The existing EU will benefit from enlargement through easier access to 75 million new citizens.

But many of these benefits have already materialised: the EU eliminated most import tariffs (bar farming, naturally) on goods from Central Europe in 1997, which reciprocated in 2002. Goldman Sachs estimates a boost of only 0.4% to the EU's GDP from the accession of the Ten in the early years - and most of that will go to Germany, Austria and Sweden. There's no economic bonanza in prospect.

Moreover, despite their supposedly pro-US, pro-free market views, the newcomers have also expressed strong profederal views in the drafting of the EU's new constitution.

Of the 10 accession states attending the drawing-up of the constitution, only the Latvians and to some degree the Poles raised objections to the word 'federal'; Britain got the word struck out with no help from the new kids on the bloc. Worse from Britain's position (even the pro-EU Blairite one), they all accepted the inclusion of the Charter of Fundamental Rights in the constitution, something London has been desperate to avoid, given its revolutionary implications for British law.

Britain is likely to find precious few soulmates among the newcomers; and even if it did they would not be powerful enough allies to help Britain win many battles in Brussels. The abolition of the national veto in 25 new important policy areas in favour of qualified majority voting related to each member's population, means that the Ten will have only a limited impact on the outcome of voting in the council of ministers and less in the European parliament.

Their arrival also creates a two-tier E U: the newcomers will not be full members when it comes to farm handouts from Brussels or mobility of labour with the rest of the EU (only five countries, including Britain, have agreed to immediate free access of their peoples on EU entry). None will adopt the euro much before 2010.

All of which limits their influence inside the EU for the next decade. The Ten will much more likely become client states of the EU, desperate for Brussels largesse and subsidies, anxious to win the full privileges of membership as soon as possible and unlikely to vote against the prevailing Franco-German line. Like all new members given access to an exclusive and wealthy club, they will show their gratitude by becoming exemplary members, running with the mainstream, as defined by the dominant Franco-German axis. Inevitably, and often against their instincts, they will kowtow to those who control the Brussels purse-strings.

The same will be true in foreign affairs: many of the present leaders of the Ten are far more pro-American than Jacques Chirac or Gerhard Schroder, but that will fade as memories of US help in securing their freedom withers. It already has among people: most did not agree with their leaders' pro-Bush stand in the Iraq War (Poles were annoyed to discover their government had contributed troops). As Brussels replaces Washington as the power centre that matters to them, the Ten will fall in with the growing anti-US sentiment across the EU. Britain 'winning the arguments' in Brussels looks as big a pipedream as ever.